KB Home Reports First Quarter 2008 Financial Results

Business Wire, March 28, 2008

LOS ANGELES -- KB Home (NYSE:KBH), one of America's largest homebuilders, today reported financial results for its first quarter ended February 29, 2008. Results include:

* Revenues totaled $794.2 million in the first quarter of 2008, down 43% from $1.39 billion in the year-earlier quarter. Housing revenues of $726.7 million for the quarter ended February 29, 2008 declined 47% from the corresponding period of 2007, reflecting a 43% decrease in homes delivered and a 7% decline in the average selling price. The Company delivered 2,928 homes at an average selling price of $248,200 in the first quarter of 2008 compared to 5,136 homes at an average selling price of $267,400 in the first quarter of 2007.

* For the first quarter of 2008, the Company reported a loss from continuing operations before income taxes of $267.9 million, including pretax, non-cash charges of $223.9 million associated with inventory and joint venture impairments and the abandonment of certain land option contracts. For the first quarter of 2007, the Company reported income from continuing operations before income taxes totaling $15.3 million, including $8.7 million of pretax, non-cash inventory-related impairment and abandonment charges. The Company generated a net loss, including the effect of a $100.0 million deferred tax valuation allowance charge, of $268.2 million, or $3.47 per diluted share, in the first quarter of 2008. This compared to net income of $27.5 million, or $.34 per diluted share, in the year-earlier period, including income of $16.8 million, or $.21 per diluted share, from the Company's French discontinued operations.

* The Company's cash balance of $1.32 billion at February 29, 2008 was largely unchanged from the balance at November 30, 2007. The Company's ratio of debt to total capital was 58.0% at February 29, 2008, compared to 53.9% at November 30, 2007. Net of cash, the ratio of debt to total capital was 35.1% at February 29, 2008, compared to 31.1% at November 30, 2007 and 46.2% at February 28, 2007.

* On January 25, 2008, the Company entered into an amendment to the unsecured revolving credit facility it has with various banks. The amendment lowered the minimum consolidated tangible net worth the Company is required to maintain from $2.0 billion to $1.0 billion and reduced the aggregate commitment under the credit facility from $1.5 billion to $1.3 billion. The amendment did not change the November 2010 maturity date of the credit facility. At February 29, 2008, the Company had no borrowings outstanding under the credit facility. Including its cash balance, the Company's liquidity was more than $2.3 billion at February 29, 2008.

* The Company's backlog at February 29, 2008 totaled 4,843 homes, representing potential future housing revenues of approximately $1.23 billion. These backlog measures declined 57% and 59%, respectively, from the Company's 11,183 backlog homes and $3.04 billion in backlog value at February 28, 2007. Company-wide first quarter net orders for homes decreased 75% to 1,449 in 2008 from 5,744 net orders in the same period of 2007, exacerbated by a significant reduction in the number of active selling communities. The Company's cancellation rate improved to 53% in the first quarter of 2008 compared to 58% in the fourth quarter of 2007. The Company's cancellation rate was 34% in the first quarter of 2007.

* As previously announced, KB Home has been ranked the #1 homebuilder in FORTUNE magazine's list of America's Most Admired Companies[R]. KB Home ranked first in every category measured. It is the second time in three years that KB Home has received this honor.

"Our first quarter financial results reflect the persistently challenging conditions in U.S. housing markets and the strategic measures we have taken over the past several months to streamline our land positions and reduce the number of communities where we operate," said Jeffrey Mezger, president and chief executive officer. "Our industry continues to confront a growing oversupply of new and resale homes, tight mortgage lending conditions and a highly competitive pricing environment. These conditions drove down sale prices and further compressed margins in the first quarter of 2008, prompting us to recognize additional impairment charges and abandon certain land option contracts that no longer made financial sense. Until prices stabilize and consumer confidence returns, we believe inventory levels will remain significantly out of balance with demand. We do not anticipate meaningful improvement in these conditions in the near term, as it is likely to take some time for the market to absorb the current excess housing supply and for consumer confidence to improve."

"During the quarter," Mezger continued, "we operated with significantly fewer communities than a year ago due to our concerted efforts throughout last year and into the current year to reduce inventory, consolidate or exit underperforming markets, and re-size our business to align with market realities and a slower sales pace. Looking forward, we will continue to evaluate our land investments and market positioning to provide a strong, competitive and geographically diverse foundation for growth when the housing markets recover."